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Risk and Reward

Investing risk and Reward

Written by R. A. Stewart

Weighing up the risks and rewards of various investments is doing your due diligence which is the responsibility of every investor.

There is no shortage of choice for investors to get involved with but it is a matter of choosing the ones which are right for your personal circumstances and goals.

Here are my personal views of some of the types of investments available:

High interest accounts with Finance companies

If a company is offering you an investment offering you a high interest; it can only mean that they are also charging high interest to their borrowers and the reason why some people are prepared to pay a higher rate of interest is because they have been turned down by a bank. This could only mean one thing. “These are people who are at a higher risk of defaulting on their loans.”

During the Global Financial Crisis of 2007-2008. Several finance companies in New Zealand went into liquidation. Prior to this some financial commentators warned people that the high interest rates being offered by these companies does not reflect the risk they are taking.

Investing in Gold through an online investing platform

Investors are able to invest in gold through the internet via apps similar to Sharesies, Hatch, and Robinhood but is this a safe way to invest?

I am not so sure because the problem with gold is that it provides no income, therefore investors are relying on capital gains to make money. 

It is the transaction fees which could kill off any likelihood of profit, however, having said that, this is a good way to get involved in gold as an interest for a modest outlay. Just make sure you only use money which you would class as discretionary spending money.

Investing in Bitcoin

Is investing in Bitcoin a safe investment?

My answer to this is that nothing is 100% guaranteed, Bitcoin is a volatile investment. If you are prepared to ride out the lows then you can make capital gains for you. 

It is not a substitute for your retirement fund and under no circumstances should you invest your entire life savings in bitcoin. The same is applicable to the share market and gold.

If you have discretionary spending money then using it to invest in Bitcoin is the way to go and who knows, you may become the next Bitcoin millionaire.

There are risks with Bitcoin but if you use your common sense and learn as much about the risks as you can then you can reduce your chances of making choices which can be costly.

Investors have so many options to invest these days but there comes the risk of losing due to an economic downfall therefore, it pays to be on the conservative side. That is to diversify and spread your money around. 

About this article

This article is of the experience and opinion of the writer and may not be applicable to your personal circumstances therefore discretion is advised. You may use this article as content for your blog.website or ebook.

Read my other articles on www.robertastewart.com

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Cost of living crisis affecting retirement savings

Cost of living crisis affecting retirement savings

Written by R. A. Stewart

Thousands of New Zealanders have suspended contributions to their retirement fund due to the cost of living crisis and this will affect them when their retirement comes around.

New Zealand financial adviser Carissa Fairbrother advised people to keep sowing into your kiwisaver whatever your financial circumstances. Look at where else you can make cutbacks because not investing into your Kiwisaver will affect you when you retire.

Kiwisaver is New Zealand’s retirement scheme; it is voluntary, unlike the retirement schemes of other countries which are mandatory.

There is a $520 tax credit per annum for contributions to Kiwisaver but to obtain this investors will need to deposit a minimum of $1040 every year. This is just like getting 50% interest on your money for the first year the money is deposited.

Anyone who is a New Zealand resident can join kiwisaver. There is no upper or lower age limit. People under the age of eighteen or sixty five and over are not eligible for the $520 per year tax credits. It is still a good idea to join kiwisaver despite this for several reasons.

The $520 tax credits or government incentives as they are sometimes called is paid out in July into your Kiwisaver. If you contributed less than $1,040 during the previous year then you will receive 50% of your contributions.

The Kiwisaver year begins on July 1 and ends on June 30. It makes sense to check your contributions during the year and to make sure that you deposited at least $1040 by June 30.

One is it will give the young ones a good start to life as far as savings are concerned and it will also give them a good education in finances. 

For those aged 65 and over, it is still a good idea to keep contributing to your kiwisaver if you are not going to be using it in the short term.

Buying your first home

If you are purchasing your first home you may be able to use some of your kiwisaver for a deposit. It is all the more reason to start saving as early as possible as it will enable you to reach your goals quicker.

There are other circumstances where you may be able to access your Kiwisaver early. These are if you have a terminal illness, you are moving overseas permanently, or due to financial hardship. There are lots of hoops to jump through before you can access your money.

It is all the more important to have a rainy day fund when everything is going well for you and not just fritter away your discretionary spending money because things do go wrong in life.

It is never too late to join Kiwisaver, you can still join even if you are 65, though you are not eligible for the government incentives. It is still worth your while joining. It is a good way to play the share market.

You are never too young to join kiwisaver. You may not be eligible for the government incentives until you are 18 but joining early then having family members make contributions while you are still at school will give you a good financial platform for the future. Who knows, a rich uncle may leave you a sum of money in his will to be deposited into your kiwisaver.

About this article

This article is of the experience and opinion of the writer and may not be applicable to your personal circumstances, therefore discretion is advised. You may use part or all of this article as content for your ebook, website, or blog.

www.robertastewart.com

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5 Factors which determine your risk profile

Factors which determine your Risk Profile:

Written by R. A. Stewart

Your risk profile is the amount of risk you are advised to take with your investments. There are many factors which determine your risk profile with the main one being whether the money you are investing is needed in the short term, medium term, or long term. 

Short term is when you need the money within 12 months

Medium Term is when you need the money within 5 years

Long term is when you need the money in more than five years time

Here are the main factors in determining your risk factor:

Factor 1: Your age

Young people have one thing in their favour which the older ones don’t have and that is time. The young ones have more time to recover from financial setbacks such as a share market crash, a job loss, or whatever, therefore are about to invest in growth funds which can be volatile. Older people need to be a little more conservative. New Zealand financial advisor Frances Cook has a formula for working out what percentage of your portfolio should be in shares; it is this: subtract your age from 100. Even if you are in your twenties that does not mean you should be reckless with your money and invest into some kind of risky venture. 

Factor 2:Your health

Your health is a major factor in determining your risk factor. If you have a health condition which requires or may require expensive medical treatment in the future then investing in growth funds may not be your best option because you do not want to lose your money just when you need it. This does not mean that you should not invest anything in growth funds but just not most of it. It may be a good idea to set up a bank account for those medical bills.

Factor 3: Your Personal Circumstances

Your own personal circumstances need to be taken into account. If you are single with no commitments then you will be able to take more risks with your money than someone who is married with children.

Factor 4: Your Debts

Your debts are a big factor in what you should do with your money. There is no point in investing your money at 5% interest when you are paying 15% interest on your loans. People with debts have a responsibility to pay off their own debts and need to prioritise that before turning their attention to investing. 

Factor 5: Your Temperament

Your temperament is a factor. If you are going to lose sleep at the thought of losing your money; something which can happen if you are investing in the share market, then going for more conservative funds is better for you but when it comes to long term investing such as your retirement fund then investing too conservatively will mean that you will likely end up with a lot less money in the kitty when you retire.

About this article

This article is of the opinion of the writer and may not be applicable to your own personal circumstances, therefore discretion is advised.

You may use this article as content for your blog or ebook. Feel free to share this article with others.

www.robertastewart.com

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Book Review-Your Money, Your Future

Written by R. A. Stewart

There are a number of books on personal finance on the market and one of these is “Your Money, Your Future by New Zealand financial advisor Frances Cook. In this book Frances provides practical advice and tips on managing your finances and how to formulate a strategy for achieving financial independence. There is no size fits all when it comes to designing a life and Frances makes allowances for that. Here are some interesting points from the book which I want to share in this article.

  1. To calculate what percentage of your money should be invested in shares, deduct your age from 100. For example; if your age is 65 then 35% of your money should be in shares. I think that the majority of investors probably have a higher percentage of their money in shares than this formula suggests. It is really a case of your timeline as far as when you are going to use the money.
  2. Putting your money into a savings account may feel safe to some people but over a period of time that money is losing it’s value because of inflation. Your money has to outpace inflation and it won’t do that in a savings account. Only your emergency cash fund should be kept in a savings account and money used for utilities and everyday living costs.
  3. The rule of 72 explains how quickly you can double your money. It goes like this; simply divide 72 by the average rate of return on any investment. If the average return is 7% then it will take you 10 years to double your money (72 divide by 7).

This is the magic of compounding interest. This is all assuming that you do not take your profits but rather allow them to be added to the principal so that you are earning interest on interest.

  1. You cannot beat the market so buy the whole thing! Frances talks about diversification here and explains how this approach beats trying to time the market every time. There is a saying, “Its time and not timing which is the key to making money on the share market.”
  2. Retire to something not from something. Frances points out that life needs to have a purpose otherwise it will be meaningless. You have to have an end goal in sight for when you finish work. Your retirement plan does not have to involve spending, it could be spending more time with the family or gardening.

You may be able to find the book, “Your Money, Your Future” by Frances Cook on Ebay or Amazon if you live outside of New Zealand. In New Zealand, the Trademe auction site may have copies.

I have read a lot of books on investing and this one is one of the best. It contains several gems of advice relating to personal finance. Whatever your personal circumstances are, you will find this book helpful in pointing you in the right direction.

www.robertastewart.com

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5 Ways to Diversify your investments

5 Ways to Diversify your investments

To have a diverse portfolio means to have your money in several places so that if one company or industry is in trouble then income from your other investments should at least minimise the shock.

There are 5 ways to diversify your portfolio. 

Number 1: Invest in several industries

Investing in different kinds of industries protects you from a downturn in one. With the online share market platforms I am with I have investments in a building company, an energy company, a farming retailer, phone company, and a New Zealand milk supplier. This diversification technique minimizes risks and gives me plenty of interest too.

Number 2: Invest in several funds

If you invest in managed funds and that includes everyone who is in Kiwisaver then you will be in various types of funds; growth, balanced, or conservative. The best strategy is to invest in the fund which is right for you and that depends on how soon you need the money. Long term, medium term, and short term money should be in growth, balanced, and conservative funds respectively but it all depends on your risk profile.

Number 3: Invest in different platforms

Most of us have heard of the online investing platforms such as Sharesies, Hatch, Investnow, Kernel Wealth, and Robinhood. Investing in several different platforms will help cushion you against the shock of having one of them fail, and certainly, there is no guarantee that this will not happen. I advise not investing all of your life savings into one online platform.

Number 4: Invest in different asset classes

Investing in different types of asset classes will enable you to withstand a downturn in one class of asset. Investing in fixed term interest, the share market, gold, and property are all different types of assets. It all depends on what the right kind of assets are right for your kind of personal circumstances. 

Number 5:Invest in different companies

This is very important. It is unlikely that all of the companies will fail even though the industry is going through a bad patch. This rule is just as applicable to investing in finance companies for a fixed term return as it is for shares. 

Benefits of Diversification

The number one benefit of diversification is it reduces your portfolio risk. If you placed all of your eggs in the one basket then you could lose it all if that one company went under and it did happen to some investors during the 2008 Global Financial Crisis (GFC) and 1987 Sharemarket crash (Black Monday).

It can be enjoyable for investors to own a little bit of a number of countries. Micro investment platforms such as Sharesies, Hatch, and Robinhood make this affordable for Mum and Dad investors.

Downsides of Diversification

Diversification can be time consuming but then everything worth doing is worth doing well. Investing in managed funds or mutual funds as they are called in the US is an option for busy people. More transaction fees and commissions is another downside to diversification and that could reduce your short term gain.

About this article: This article is of the opinion of the writer and may not be applicable to your personal circumstances, therefore discretion is advised.

 

Sharesies is an accessible and straightforward way to invest in the stock market. You can get started on your investment journey and start building your wealth. However, before making any investment decisions, it is essential to do your research and seek professional advice if necessary.

 Join Sharesies here

Disclaimer: I may receive a small commission if you sign up with Sharesies.

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Entry-Level Job: 4 Must-Know Tips

Entry-Level Jobs 101: 4 Must-Know Tips

For most people, aiming for a higher position at once is the key to job search success. However, for some people who know that in order to succeed in the job market, they have to, literally, start from scratch. This means that people who want to grow positively in the working world; they have to learn the basics and fundamental principles of working, how it is to love the work most people do, and how to establish a good working relationship with his or her colleagues.

 

In order to enjoy all of these, one must submit himself or herself to an entry-level type of job. This refers to a job that requires minimal skills and expertise with no experience requirement needed. 

 

Because of its nature, entry-level jobs are characterized by low salary, require physical work, and sometimes need field work.

 

Most often than not, people who are into entry-level jobs have very low hourly rates and may or may not entail insurance. This would mean that any hospital expenses caused by accidents that happened while the worker is at work may or may not be compensated by the employer, meaning there is no guarantee or whatsoever.

 

What’s more, most entry-level jobs are on a part-time basis. Examples of entry-level jobs are receptionist, apprenticeship, those who are working in a fast food restaurant, customer service, cashiers, etc.

 

Contrary to popular belief, entry-level jobs should not be ignored.  What people do not realize is that entry-level jobs offer more than just low wages. These jobs are the foundation of all other positions available in the job market.

 

In most cases, people who start to work on higher positions right after they graduate from college are easily bored from their work. What is even worse, there is no room available for personal growth and career advancement.

 

Entry-level jobs are the stepping-stone to success in careers. So, for people who wish to grow and be promoted to a higher position, here are some tips that they can use:

 

  1. Workers who are in the entry-level position should show enthusiasm, efficiency, caring, and love for his work.

 

  1. They should master their skills and hone their craft.

 

  1. They should be an expert on customer service.

 

  1. They should know how to impress a customer who happens to be seeking an employee who knows optimum customer service.

 

These are just a few of the qualities that must be employed by an entry-level worker in order to advance to a higher position. And once he reaches the top, he knows that work is definitely something worth valuing for.

Your resume or CV can be the difference between getting the job you want or having your application ignored. If you need help with writing out your resume then check this out

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Avoiding Mistakes with Money

“There are three ways to learn, the hard way, when you learn from your own mistakes, the easy way, when you learn from the mistakes of others, or the tragic way, you never learn and keep making the same mistakes over and over again.”-Brian Houston, Australian televangelist.

Making mistakes with your finances will be very costly. Here are some of the main ones to avoid.

Mistake number one-Spending everything you make

This is a common mistake made by too many people. You can by living within your means and still making this mistake. It is when an unexpected bill arrives that causes a lot of financial pain in households. Having some kind of emergency fund and a savings for the future fund will have you better prepared for financial shocks. 

Mistake number two-Not investing

Not investing any of your savings is a common financial mistake made by financially illiterate people. There are lots of opportunities to sow into your financial future. Joining your country’s retirement scheme is a must do. New Zealand and the United States retirement schemes have their own incentives to encourage members to contribute; make use of these. Share market platforms such as Sharesies in New Zealand and Robinhood in the United States enable investors to drip-feed money into the markets. 

Mistake number three-Not joining your country’s retirement scheme

This is a mistake which I have seen too often and this mistake is usually made with some kind of excuse. In most cases it is not a mistake but rather a choice; one which is going to cause problems later on in life. Most countries have their own retirement scheme and it is up to you to join whichever country you belong to.

Mistake number four-Unwilling to become financially literate

There is really no excuse for not being financially literate with so much material of a financial nature being available on and offline. Much of it is written in an easy to read format. Your local library will contain books which are useful. The internet has a lot of information available. If you have any questions then ask google or chatgpt and see what comes up.

Mistake number five-Not taking responsible for your own finances

Some people like to blame others for their own mistakes instead of taking responsibility for them. Take advice then make your own decisions. Once a decision has been made, take responsibility for them. 

Mistake number six-Hanging out with the wrong crowd

Spending too much time with the wrong people will hinder you in life. They will have some kind of influence on your lifestyle and this in turn will affect the decisions you make. You need to spend time with intellectually stimulating people. You are the average of the five people you spend most of your time with.

Mistake number seven-Impatience with money

Developing your own financial strategy requires patience. Those who are impatient will seek shortcuts such as playing the lottery or some other get rich quick scheme. AS a result many people lose a lot of money in their attempts to make a lot of money in a short time. The Share market is a long term game and requires patience.

Matter of choice

What you do with your money is a matter of choice and all of the mistakes in this article can be described as such. You make your choices and your choices make you.

About this article: This article is of the experience of the writer and may not be applicable to your own personal circumstances.

www.robertastewart.com

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Internet Banking Tips

Internet Banking Tips

Written by R. A. Stewart

Internet banking is here to stay whether we like it or not but so is internet scams which have caught so many people out. It is important to stick to a set of rules in order to minimise your chances of being caught out by these scams. Here is a list of rules which will help you to keep out of trouble.

Rule one-Use a separate email address for dating sites.

If you are using a dating site then do not use the same email address you would use for your banking. You have heard of “Romance Scams” and these come in many different forms. You certainly do not know who you are dealing with and you do not want your main email address clogged up with unwanted emails. 

Rule two-Two factor authentication

Give yourself an extra layer of protection by setting up a two-factor authentication. This will involve setting it up with your phone. Once this is done you will sign in with an username and password and then receive a text with a code which you will type in the space provided.

Rule three-Do not connect your debit card to your personal account

This is just asking for trouble! One person I know was fleeced of $3,000. He invested this money into his everyday account then the money disappeared from his account the following day. A site he bought goods from had his debit card details and this was linked to his personal account with the hacker having his and other customer’s banking details. The bank made good his loss.

Rule four-Do not leave all of your money in one account

You should never just leave all of your money in your personal/everyday account. Your savings should be in a separate account. It is important to establish firstly what this money is for and invest it accordingly

Rule five-Do not click on links

It is not always possible to know whether an email you receive is from your bank or from a scammer, therefore, make it a rule to never click on a link in an email. Instead, type in your bank’s website on your computer.

Rule six-Use this google trick

Copy and paste any email you receive from your bank into the google search engine and see what comes up. Do the same with any phone number you receive in an email or text. This night threw up some red flags.

Rule seven-Never, never give your password to anyone

Never give your password to anyone if they ask for it. If anyone asks you for your password in an email or text message then this is a certain red flag.

About this article

Feel free to share this article on social media. You may use this article or any part of it as content for your website or blog.

www.robertastewart.com

 

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Tell tale banking scams

The tell-tale signs of a scam

Written by R. A. Stewart

Millions of dollars are lost to scammers every year therefore, it is important to put rules in place in order to not be a victim. Here are 8 telltale signs to look out for.

Sign 1: The return is expected to be 10%+ per annum

Be even more sceptical if they say the investment is low risk. Investments by their very nature have their ups and downs. If it sounds too good to be true it almost certainly is.

Sign 2: Very high past returns

Scammers will try to tempt you by telling you about huge returns they have made in the past. They will select a particular period to present to you or simply exaggerate past returns.

Sign 3: You will be pressured into a quick decision

“Get in now before it is too late” or “act now” are commonly used phrases to get you to sign up. Scammers will prey on the fear of missing out mindset which many people suffer from.

Sign 4: You are approached out of the blue

A stranger approaches you by text, email, or phone with this great offer that is going to make you rich. The truth is they are the ones who are getting rich from this offer.

Sign 5: Free courses or seminars

You are offered a seminar for free or at a minimal cost. The presenters at the seminar can be very pushy and pressure attendees to sign along the dotted line.

Sign 6: Asking for PIN numbers and passwords

This is applicable to email scams. Never, never, never share your PIN numbers and passwords with anyone. Banks will never ask for these. When signing in to your bank type in the URL address and never just click on a link because scammers will set up a fake bank website which looks like the real thing. It is often hard to tell the difference though.

Sign 7: You have won a prize you never entered.

You receive an email saying that you have won a prize in a competition you never entered. This has scam written all over it. Delete the email immediately.

Sign 8: You are asked not to share this opportunity with others

A scammer does not want you to share this so-called opportunity with others; they want you to keep it to yourself. The reason being that others may spot the tell tale signs that this is a scam before you do.

This is all a reminder to be very vigilant and set some hard and fast rules that you never break under any circumstances. Things you can do to prevent being scammed.

1 Never, never, never give out your password or pin number to anyone under any circumstances. 

2 Never click on any email links from any bank; instead, type in the URL address and log in.

3 Do not leave all of your money in one bank account. Invest it in several places.

  1. Do not use the same email you use for banking for signing up to dating websites.

It is a good idea to cut out newspaper clippings from articles about people who have been scammed and learn from other people’s experiences. Take notes of how you can tighten your own security.

About this article

The information provided is based on the writer’s knowledge and experience, therefore discretion is advised as it may not be applicable to your personal circumstances.

www.robertastewart.com

 

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Investing in Gold

Investing in Gold

Written by R. A. Stewart

Is Gold a good investment?

That is a question I cannot give you an answer to because it is a bit like a “How long is a piece of string?” question.

Whether investing in something is good or bad really depends on your personal circumstances and where this investment fits in with your objectives.

Is the money/investment needed in the short term, medium term, or long term?

Once you have answered this question you will have a better idea of whether gold is a suitable investment.

Problem with gold is…

That it does not provide investors with an income. All they can expect is capital gains; that is, selling gold at a higher price than when it was bought for.

The Share market provides a dividend to shareholders of the various companies and there is the opportunity to profit from the increasing value of the shares. 

Another problem with holding physical golds is the storage costs and this can mitigate any capital gains from selling it.

Different ways of investing in gold

There are several ways of investing in gold and there are pros and cons with each of them.

The easiest way of investing in gold is to purchase shares in a gold mine but this is very risky and should only be done with money you can fully afford to lose. Your country’s stock market may have listed companies of gold mines.

Purchasing gold coins is another way. You will find gold coins listed on ebay but the downfall of investing in gold in this way is that the seller will seek the highest price possible for their coins; and it may not reflect it’s true value.

Buying gold from a dealer is another way but this is beyond the means of a lot of people and then there is the problem of storage not to mention the risk of theft.

Collecting gold jewellery is another way of investing in gold. Just as collecting other items such as postage stamps, old comics, or barbie dolls, they give enjoyment to the collector and the items are worth something when it comes time to sell.

Investing in gold as an interest

Gold can provide an added interest to your portfolio. If you have discretionary money to spend then investing in gold can add an extra string to your financial bow and if the investment turns to custard then there is no damage done. After all, millions of dollars are lost in lotteries every year and no one blinks an eye lid. Giving up lotteries and use the money to build up your gold investments should be your best approach. 

The risk of investing in gold

There are risks with investing in Gold as there are with other types of investments but these risks can be managed. It is important for investors to do their research in order to understand these risks. 

Investing in gold should not be an alternative to contributing to your country’s retirement scheme.

The rules of investing

The rules of investing are just as applicable with gold as they are with other types of investments. Where does gold fit into your overall investment strategy? If you have some disposable spending money to invest then investing in gold is a good option. It will provide an added interest to you; that is interest in terms of enjoyment such as a stamp collector would derive interest from his or her hobby.

It is certainly not wise to just purchase gold with money which you can ill afford to lose or to invest your whole life savings into it. That is just asking for trouble. 

To summarise

Investing in gold can provide you with an interesting string to your financial portfolio, but it does have its pitfalls. It is important to weigh up the pros and cons and only invest money in gold which you can afford to lose. Read up on the subject and then decide whether gold is a suitable investment for you.

About this article

The opinions in this article are of the writer’s opinion and may not be applicable to your personal circumstances. You may use the content for your blog/site or ebook. Feel free to share the article on social media.

www.robertastewart.com